Table of Contents
- What is an Independent Wealth Building Group?
- Why Join or Form an Independent Wealth Building Group?
- Finding the Right Members for Your Wealth Group
- Creating an Effective Structure and Strategy
- Operating Your Wealth Building Group
- Avoiding Common Pitfalls
- Knowing When to Make Changes or Disband
- Key Takeaways for Building Wealth Together
What is an Independent Wealth Building Group?
An independent wealth building group is an organization of individuals who pool their money to make joint investments and build wealth collectively. Unlike an investment club or multi-level marketing (MLM) group, an independent wealth group operates autonomously to meet its own investment goals.
The purpose of an independent wealth building group is for its members to:
- Achieve higher returns through larger investments
- Diversify risk over multiple assets and classes
- Share due diligence and combine investment knowledge
- Motivate each other to build long-term wealth
Groups can range from 3-15 members on average and have varying legal structures. Some form a legal partnership or Limited Liability Company (LLC) whereas others operate more informally with verbal agreements.
Here are some key traits of these collaborative wealth groups:
- Self-organized and unaffiliated
- Focused outside of stocks to include real estate, crypto, etc.
- Own and divide investment assets equally
- Allow entry/exit of members with clear rules
- Meet regularly to review goals and performance
Why Join or Form an Independent Wealth Building Group?
There are many potential benefits to joining or forming an independent wealth group instead of investing solo:
Greater Returns and Cost Savings
By pooling investment funds, groups can access certain assets like rental properties, index funds, blockchain nodes, or private equity that would be out of reach for individual members. This unlocks higher earning potential.
Costs can also be distributed across the group to save on:
- Brokerage and transaction fees
- Due diligence like inspections on real estate
- Accounting and tax filing services
Shared Knowledge and Accountability
Members bring diverse backgrounds of financial knowledge to the group. One may specialize in stocks while another in arbitrage. Together the group enjoys shared expertise leading to better-informed decisions.
Regular meetings provide accountability as members commit to mutual goals and benchmark performance as a team. This shared discipline limits emotional decision making.
Mitigated Risks
No investment is risk-free, but a group can mitigate bad outcomes through wider diversification. By allocating funds across many assets from private equity to precious metals, one or two underperforming investments won't make or break the group's total portfolio.
And unlike risky penny stock speculation, groups focused on long-term fundamental wealth building through assets that cash flow or appreciate over decades.
"Coming together is a beginning, staying together is progress, and working together is success." - Henry Ford
Finding the Right Members for Your Wealth Group
Once inspired to form an independent wealth group, the next step is curating a roster of aligned members. Some tips on building the right group:
Where to Look for Members
- Start with your inner circle of financially savvy friends or family first
- Expand to close networks like colleagues you trust or members of local financial meetups
- Consider online communities if unable to find members locally
Vetting Potential New Members
Require interested prospects to:
- Interview with existing members
- Provide background like credit score or past tax returns
- Share their investing experience and financial goals
- Complete a trial run by sitting in on group meetings
Establishing Ground Rules
Before taking on new members, determine rules like:
- Joining criteria and investment amount requirements
- How new members are approved and added
- Conditions for removing poor performing members
Rules provide accountability and commitment once the group expands beyond founding members. Revisit them annually as your independent wealth group evolves.
Creating an Effective Structure and Strategy
To operate cohesively, independent wealth groups require a defined structure and strategy including:
Forming a Legal Partnership
While less formal groups can work between close friends, it may be wise to create an official legal entity like a partnership or multi-member LLC. This clarifies financial liability, decision rights, ownership splits, and tax implications.
You can DIY incorporate or work with a business filing service. Outline binding agreements on profit distribution, responsibilities etc. and stay legally compliant.
Defining Your Investing Goals
As a group, set measurable wealth building goals based factors like:
- Timeframes for hitting net worth milestones
- Target monthly or annual return rate
- Intended types of assets/allocation
Revisit goals annually as progress is made and risk tolerance changes.
Researching Your Investments
Perform thorough due diligence on all potential investments including:
- Forecasting long term growth trends
- Consulting data and expert opinions
- Modeling future cashflows
- Stress testing across market scenarios
Stay disciplined about consistently vetting opportunities even when you come across an enticing lead.
Allocation Across Assets
Diversify funds strategically across 5-7 asset baskets like:
- Stocks - indexed, dividend, etc.
- Real estate - residential, commercial properties
- Private equity - invest in other businesses
- Cryptocurrencies - blockchain asset portfolio
- Commodities - gold, natural gas, corn, etc.
- High yield savings and CDs
This balanced portfolio aligns risk to the group's consensus tolerance.
Operating Your Wealth Building Group
Once legally aligned, funded, and with goals defined, it's time to begin operating as a cohesive unit.
Communication Methods
Set regular meeting cadences say monthly or quarterly either virtually or in-person if local. Discuss performance, vote on investment decisions, adjust strategy, and handle other business matters.
Between meetings, collaborate over group messaging apps. Create channels/threads for sharing deals, due diligence findings, approvals, etc rather than dozens of fragmented one-off conversations.
Assign rotating moderators to keep meetings and discussions focused.
Tracking Financial Performance
Select a treasurer within the group responsible for bookkeeping and reporting on metrics like:
- Total assets under management
- Returns across investments
- Contributions/redemptions by members
- Taxes and income for distributions
Make sure all members have transparency into reporting to align on progress.
Sample Performance Tracker
| Investment | Category | Cost Basis | Market Value | Return % |
|---|---|---|---|---|
| Rental Property A | Real Estate | $250,000 | $328,000 | 31% |
| REIT Index Fund | Real Estate | $125,000 | $138,000 | 10% |
| Anchor Protocol | Crypto | $73,000 | $94,000 | 29% |
| Equipment Leasing LLC | Private Equity | $220,000 | $412,000 | 87% |
Note: Track income, liquidity, withdrawals, etc. in addition to market value.
Adding or Removing Members
Refer back to your membership agreements and rules regarding changes.
When adding members:
- Require buy-in equal to existing members so ownership stakes stay aligned
- Onboard new individuals smoothly
Removing non-performing or disruptive members may require a majority vote along with a redemption of their assets per your contract terms.
Changes to the group's roster should be done carefully to avoid internal conflict.
Avoiding Common Pitfalls
Independent wealth groups require work and maturity to thrive long-term. Here are some pitfalls to avoid:
Personality Conflicts Differing risk appetites or clashing personalities can create resentment. Establish rules of conduct, listen to disagreements, and keep focused on your wealth goals to prevent conflicts festering.
Free Riders Those not pulling equal research or administrative weight can take advantage. Combat by assigning responsibilities, tracking participation, and tying ownership splits to contributions.
Emotional Decision Making Avoid reactionary moves even if the market downturns or your "hot stock tip" underperforms. Stick to the diligent analysis and wealth building principles that brought your group together.
Trust Erosion Even minor transparency issues over reporting or vetoes can erode faith. Frequently communicate details of investments and decisions to maintain information symmetry.
Knowing When to Make Changes or Disband
Over months and years, individual goals may diverge from the wealth group’s direction necessitating tough changes:
Planned Exits Allow members to redeem their rightful assets if they desire through your official agreements. Give sufficient notice to find a replacement member if needed.
Group Dissolution If too many members exit or disagreements disrupt operations, vote to dissolve the group selling off assets per agreed terms and distributing them out.
Fund Rebalancing As some assets outperform significantly, vote to "rebalance" by selling down outsized positions to realign allocations to the original investment plan.
While drastic, changes are natural to keep the health and cooperation of the group or allow members life flexibility.
Key Takeaways for Building Wealth Together
In summary, here are best practices when creating your own independent wealth building group:
- Carefully vet prospective members for cooperation and skill fit
- Institute bylaws and financial tracking for transparency
- Set measurable wealth creation goals tied to clear investment plans
- Maintain consistent communication and education
- Revisit strategy as goals adjust but avoid reactionary changes
- Commit to the shared disciplines that brought you together
- Allow planned exits so the group endures long-term
Collaborating in community takes work but canScaling your net worth substantially through fundamentally sound assets and partnerships proves well worth it.
Seek out like-minded yet knowledgeable peers willing to put in the diligence. Brainstorm then execute on this outline for building wealth together in any market over the coming decades.
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